Library

by George L. Head, Ph.D.

A thoughtful, appreciative board or executive director may want to pay a
nonprofit's volunteers "just a little something" beyond reimbursing
individual volunteers for their expenditures on the organization's behalf.
Some nonprofits rationalize a monetary gift as a demonstration of thanks for
the loyalty volunteers have shown to the organization: "Buy yourself
something you like as a reminder of how much we like and need you." Or the
"little something" may be offered as token compensation for the countless
gallons of gas and miles of wear that volunteers put on their cars as they
so willingly drive to and from the nonprofit ("Helping you get here is the
least we can do, when you do so much for us.").

Any nonprofit executives who find
themselves thinking or saying these
words should find better ways to say,
"Thanks, please stay," to their
volunteers. The "little something" paid
periodically to all volunteers may seem
like a nice way to thank them for the
time they so graciously give to the
nonprofit, but may raise serious issues
and yield unwanted tax consequences
for the nonprofit and volunteer.

Paying volunteers money or
anything of value that can reasonably
be construed to be in exchange for their
work is confusing and potentially
dangerous to your nonprofit, and even
to the volunteers you're trying to
reward. The basic source of the
confusion and the danger is that the
law draws sharp distinctions between
employees and volunteers. The precise
distinctions vary among jurisdictions,
but the almost universal point of
difference is that employees get paid for
their work — volunteers do not. Pay a
volunteer for his or her work and you've transformed the former volunteer into
an employee — or at least you've created
a plausible basis for that person (or
perhaps someone else) to claim he or
she is an employee of your nonprofit.

Why Claim Employee Status?

A person who joined your nonprofit's staff as a volunteer, or so
you've always thought, may have
several reasons for claiming employee
status:

If your nonprofit terminates this person as a volunteer for any reason, he or she, claiming to be a
paid employee, may file for unemployment compensation benefits or may sue for wrongful termination of employment.

If this person becomes ill or is injured off the job, he or she may assert entitlement to the health insurance benefits your nonprofit
gave all its "other employees."

As this person approaches retirement age, he or she may demand pension benefits like your
"other employees" receive, or may sue for having been wrongfully deprived of eligibility to participate
in your pension plan.

If this person dies while still working for your nonprofit, his or her surviving dependents may go to
court, arguing that — because you paid the deceased from time to time — they should receive the same
life insurance benefits you provide to the families of "other employees."

If, now or in the future, this person becomes very angry with your nonprofit or with one of its leaders, the volunteer may start destructive rumors, or may go to the media, bringing adverse publicity, decreased donations, and possibly regulators' scrutiny by claiming that your organization violates the wage and hour laws by paying staff members less than the required minimum wage.

Any of these five sets of circumstances
can impose costs on your nonprofit
that are much greater than the largely
intangible benefits it gains by paying its
volunteers "just a little something."
When the potential costs substantially
exceed the probable benefits, sound
management calls for finding less risky,
more responsible alternatives. There are
some ready, effective alternatives for
retaining, motivating, and thanking all
your productive, generous volunteers.

There are Better Ways

The two primary reasons a
nonprofit's board or executive director
may be tempted to pay its volunteers are
(1) to cover their expenses for their work
and (2) to motivate their continuing
efforts for the nonprofit.

The two straight-forward ways to
cover volunteers' expenses are (1) to
reimburse individual volunteers for
particular amounts they can document
having spent for the nonprofit and (2)
for expenses that are more difficult to
document (such as for commuting or
lunches) a uniform monthly allowance
that, on the average give or take a dollar
or two, covers each volunteer's costs.
Either of these two payment procedures
accomplishes the reimbursement
objective more logically, openly,
predictably, and defensibly than the
"just a little something" approach.

Those who volunteer for nonprofits
generally do not do so for the money;
if they wanted money from their
nonprofit efforts, they would become its
employees. Instead, most volunteers
labor because they believe in a given
nonprofit's mission. Beyond the
mission, they may seek others' gratitude
for their selfless work, opportunities to
work with or lead others, or perhaps
community recognition.

Most volunteers don't work for "just
a little something" in their wallets or
checking accounts. Therefore, to reward,
motivate, and hold good volunteers
incentives such as volunteer-only social
events, "outstanding volunteer(s) of the year" awards, and newspaper articles about volunteers' group achievements can be particularly effective. These rewards require more than "just a little something" from the board or CEO. They require some creative effort, originality, and personal attention from a nonprofit's leadership. They require more personal effort and attention from the leaders, but ultimately they mean more to the volunteers whom the leaders wish to inspire and to the successful pursuit of your shared mission.

George Head is special advisor to the Nonprofit Risk Management Center. Dr. Head welcomes your comments and feedback on the issue of paying volunteers or any risk management topic or dilemma facing your nonprofit.